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What are Export Incentives?

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  • Written By: Luke Arthur
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  • Last Modified Date: 14 September 2016
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Export incentives are incentives provided by governments to increase the amount of exports that take place in a country. These incentives could come in the form of direct payments or they could come in the form of reduced taxes. Regardless of the type of incentive, the purpose of these export incentives is to make domestic products more affordable and competitive in the international market. In some cases, this type of incentive has led to disputes between countries because of differing opinions as to how much a country should help its products in the marketplace.

Many governments have offered export incentives over the years. A level of these incentives has varied from one situation to the next. In some cases, the incentives have amounted to huge subsidies by a federal government.

The most common form of export incentives is a lowering of taxes. In this situation, the government will lower the amount of taxes due from the exporter. This allows the exporter of a product to lower the price of these goods and still make the same amount of profit. When this happens, the goods from that country sell quicker and, in turn, it increases the overall sales of the goods. By doing this, the government is hoping to make the product more competitive on the world marketplace.

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Some countries are set up better than others to produce certain goods. When a government is at a disadvantage in producing a product, it may try to make up for it in other ways. Export incentives is one way the country can make up for being at a natural disadvantage to another country.

When a government decides to issue export incentives, it can often lead to controversy between countries. One country might feel that another country helped out a little too much with its exports. In many cases, a smaller, developing country may not be able to compete with the subsidies provided by a larger nation. This puts the smaller country at a disadvantage and makes it more difficult for it to make its products competitive in the marketplace.

When a dispute like this arises, it is often taken to the World Trade Organization. The World Trade Organization will step in and hear the arguments from both countries. If it is determined that one of the countries is in the wrong, the World Trade Organization can issue suggestions or orders to that country.

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Discuss this Article

B707
Post 6

I don't know too much about how the World Trade Organization works, but our world is becoming so globalized in so many different areas, we need to have an organization to moderate trade. Trade is never completely fair because there are so many factors involved.

Like I said, I don't know how the World Trade Organization hears and decides disputes among nations. Maybe, it needs to be altered a bit in how it functions.

sweetPeas
Post 5

I think that some of America's large manufacturing companies should take a good look at themselves. Of course, it's true that they want to make big money. And they can do this by transferring a lot of their manufacturing to China and southeast Asian countries.

But the fact is that the wages and benefits of Chinese workers are a pittance. I have heard that children are also involved in the labor force. Even though they have jobs, I don't think that they are "happy campers."

Let's see about fixing the circumstances that allowed this outsourcing to happen. I say, bring more jobs back to America.

SkyWhisperer
Post 4

@NathanG - I am little dubious about the power of the World Trade Organization, myself.

The article says that they can issue orders to member nations in order to resolve disputes. I don’t know how far they can go in ordering the United States, since we are a pretty powerful player.

It’s like our membership in the United Nations. Yes, we are one vote, but we are very powerful vote too. In the end, I think we need to self regulate in these matters, and choose policies that will benefit us while not alienating other countries.

NathanG
Post 3

@Mammmood - While I share your frustration, there is a danger in trying to take drastic measures to correct the imbalance.

The biggest danger, as pointed out in the article, is that other countries will cry foul. Furthermore, they can do more than run to the World Trade Organization for remedy. Instead, they can impose heavy duties and tariffs on our exports, making it impossible for us to compete, even with generous help from our own government.

This is something that we need to deal with, but I don’t think we should deal with it unilaterally. I think we should appeal to common interests between member nations, and look for an arrangement where everyone benefits. That’s where the World Trade Organization would really help.

Mammmood
Post 2

@everetra - If you want to know what would be the biggest incentive to help the export industry, try repealing some legislation for a start.

NAFTA (the North American Free Trade Agreement) was passed in the late 1990s with the understanding that it would be good for trade. A lot of people protested and said that it would be bad for jobs.

It turned out that they were right. Immediately after its passage, some big American multinationals relocated some of their operations to Mexico, where the labor was cheap.

They then sold the goods back to the United States. We basically shot ourselves in the foot, in my opinion. I think our politicians need to take a good, hard look at all of our legislation and repeal anything that does not favor good market incentives for our exports.

everetra
Post 1

I am all for market incentives to boost shipments of exports from the United States. I think it’s pretty well known that there is a huge deficit that exists between the amount of goods that we import and the amount of goods that we export.

We need to do whatever we can to shore up this trade gap, and help keep jobs in the United States. However, if you want to know the real reason that we are laggards when it comes to exports, it’s the cost of production here as compared to overseas, in my opinion.

We simply cannot compete with goods made in China, where the average worker is paid very little and has negligible health benefits. Unfortunately, I don’t see much that the government can do in cancelling out that imbalance.

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